So, the president and Mrs. Bush went down to New Orleans to commemorate the second anniversary of Hurricane Katrina. Who knows? Maybe over a latté with leading Democratic candidates Hillary Clinton, Barack Obama, and John Edwards they discussed spending even more money down there. After all, everyone seems to be saying New Orleans needs more cash.

Here’s a pop quiz: How much money has Uncle Sam spent on New Orleans and the Gulf region since Hurricane Katrina ripped the place apart?

I’ll give you the answer because you’ll never guess it. The grand total is $127 billion (including tax relief). That’s right: a monstrous $127 billion. Of course, not a single media story has highlighted this gargantuan government-spending figure. But that number came straight from the White House in a fact sheet subtitled, “The Federal Government Is Fulfilling Its Commitment to Help the People of the Gulf Coast Rebuild.”

Huh? This is an outrage. The entire GDP of the state of Louisiana is only $141 billion, according to the U.S. Department of Commerce. So the cash spent there nearly matches the entire state gross GDP. That’s simply unbelievable. And to make matters worse, by all accounts New Orleans ain’t even fixed!

You might be asking, Where in the hell did all this money go? Well, the White House fact sheet says $24 billion has been used to build houses and schools, repair damaged infrastructure, and provide victims with a place to live. But isn’t everyone complaining about the lack of housing?

Perhaps all this money should’ve been directly deposited in the bank accounts of the 300,000 people living in New Orleans. All divvied up, that $127 billion would come to $425,000 per person! After thanking Uncle Sam for their sudden windfall, residents could head to Southern California and buy homes that are now on sale thanks to the sub-prime mortgage crisis and bid up the sagging house prices in the state.

The fact sheet goes on to say that $7.1 billion went to the U.S. Army Corps of Engineers to rebuild the levees; that the U.S. Department of Education spent $2 billion on local schools; and that the Laura Bush Foundation for America’s Libraries has awarded more than $2.5 million (the pikers). The administration also provided $16.7 billion as part of the largest housing-recovery program in U.S. history.

So the billion-dollar question becomes: Where did the rest of that money go? Meanwhile, according to an article by Nicole Gelinas at the Manhattan Institute, New Orleans has earned the distinct honor of becoming the murder capital of the world. The murder rate is 40 percent higher than before Katrina, and twice as high as other dangerous cities like Detroit, Newark, and Washington, D.C.

Think of this: The idea of using federal money to rebuild cities is the quintessential liberal vision. And given the dreadful results in New Orleans, we can say that the government’s $127 billion check represents the quintessential failure of that liberal vision. Hillary Clinton calls this sort of reckless spending “government investment.”

And that’s just what’s in store for America if she wins the White House next year. Remember President Reagan’s line during the 1980 campaign about how LBJ fought a big-government spending war against poverty, and poverty won? Well think of all this Katrina spending as the Great Society Redux. And it failed. I suppose the current Bush administration would like to label this “compassionate conservatism.” But guess what? That failed, too.

Right from the start, New Orleans should have been turned into a tax-free enterprise zone. No income taxes, no corporate taxes, no capital-gains taxes. The only tax would have been a sales tax paid on direct transactions. A tax-free New Orleans would have attracted tens of billions of dollars in business and real-estate investment. This in turn would have helped rebuild the cities, schools, and hospitals. Private-sector entrepreneurs would have succeeded where big-government bureaucrats and regulators have so abysmally failed.

This is the real New Orleans Katrina story. It’s a pity that the mainstream media isn’t writing about it. Call it one of the greatest stories never told.

The Political Aftermath of Hurricane Katrina The two-year anniversary of Hurricane Katrina on Aug. 29 has sparked new media interest in the disaster and on the federal response to it. The media interest, in turn, is causing politicians -- and of course the 2008 presidential candidates -- to perk up on the issue. After Katrina hit, it was clear to us that U.S. President George W. Bush was headed for political disaster. We also thought the Democratic Party's long-forgotten liberal side would be revived as a result of the images of New Orleans in Katrina's aftermath.

We were correct about Bush. The war in Iraq has been his political Achilles' heel, but his popularity began to fall seriously after Katrina -- and it has never recovered. The Democratic Party rode the president's war-driven unpopularity to victory in the off-year congressional elections, and it has emerged as the majority party nationwide. The question, then, is whether the remnants of the old "progressive movement" -- which comprises those whose priority issues are labor, the environment and civil rights, and whose politics are at the left edge of the American political spectrum -- have actually seen a revival, or whether the Democratic Party's victories are primarily victories of its moderate wing.

The accounting on that score is more complicated, as some liberal movements have seen significant awakenings, while others have remained dormant. Progressive national political candidates are rare, and the Democratic Party remains focused on showing its pragmatic side rather than its idealistic side. Though we still think a progressive revival is happening, it is coming very slowly and in unanticipated ways.

In the final analysis, the successes and failures on the political left since Katrina show the relative strength of the various special interests that make up that side of the Democratic Party. The environmental and anti-war movements have seen the biggest successes since Katrina, while the civil rights community has been unable to translate the racial aspects of Katrina and its aftermath into a stronger position.

Politics Since Katrina

Before Katrina, Congress and 28 of the 50 governorships were in Republican hands. Now there is a Democratic-controlled Congress and 28 governorships are held by Democrats. Katrina did not cost the Republican Party the 2006 election. Iraq did. Katrina just helped soften the ground for a referendum on the war. Looking back, Katrina may not emerge as the prevailing political issue of the day, but the 2006 election could not have been a landslide without Katrina.

Before February 2002, Bush's approval stood generally above 60 percent. Then, leading up to Katrina, his rating fell into the 45 percent to 52 percent range. Only for two weeks in late 2005 and early 2006 did Bush's public approval rating hit higher than it was the day Hurricane Katrina hit. The slide from re-elected president to political liability for GOP candidates began before Katrina, but most polling data suggests that Katrina's aftermath cemented Bush's approval ratings below 45 percent. Polling suggests that the federal government's handling of the Katrina disaster epitomized voters' long-standing misgivings about Bush, which translated to disapproval for the first time.

Bush approval numbers and the 2006 election aside, however, the political discourse at the national level is mostly unchanged. The Republican Party's 2008 primary candidates include one clear moderate, a libertarian and an array representing the various stations of the political right. The Democratic primary candidates are for the most part from the party's center, each with some policies that are centrist and some that are more liberal.

In other words, the primary candidates look exactly as they have since 1992.

Liberal and Progressive Issues Since Katrina

The war remains the primary political issue in the United States, with energy and the economy following. The promotion of energy to a top national priority is a direct result of Katrina. Hurricane Katrina and then Hurricane Rita reduced U.S. oil production by more than 1 million barrels per day. Today, 200,000 barrels remain offline. The price of oil after Rita "spiked" in the high $70s per barrel, retreat briefly, and has not been lower than $65 per barrel for more than two weeks since.

Concern about energy prices paved the way for a larger debate about oil in the United States. Katrina and Iraq became bound together politically by the argument that U.S. reliance on oil was unhealthy for its economy and security. Energy independence activists said the economic impacts of the post-Katrina price spike showed that the country would benefit from having greater control over its energy sources -- control that dependence on weather (Katrina) or geopolitics (the war) counteracted. Oil independence advocates called for investment in new forms of energy, and for increased domestic energy production.

Advocates pressing for federal action on climate change took this argument one step further and said the country's reliance on oil also was partly to blame for climate change, which most implied was also the cause of Hurricane Katrina. Former Vice President Al Gore and others made the argument explicitly and said that oil was not only leading to economic uncertainty and embroiling the United States in unstable foreign lands, it also was leading to hurricanes and other disasters that had direct economic and social repercussions. Though the links between energy security and climate change are tenuous, they have held in the public mind, and climate change has been linked with energy policy discussions as a priority in the new Democratic Congress.

Other issues that seemed likely to change in the wake of Katrina included the federal government's role and the politics relating to race. The debate over whether the federal government should have an active role in society or in local and state affairs has not changed. The attitude that the federal government should keep out of state and local politics -- a trend that came in with President Ronald Reagan in 1981 -- remains in place. Katrina did not lead to a rethinking of government or its role.

The civil rights community, meanwhile, failed to use Katrina to convince Americans that a significant and unjust racial divide persists in the United States and is actively maintained in parts of the country. The majority of the visual images of Katrina's aftermath focused on minorities, primarily black Americans. Due to a lack of insurance and savings minorities were generally less equipped to deal with the flooding. Despite all of this, American views on race were almost completely unchanged by Katrina.

That the core political discussion remains unchanged since Katrina is confirmed by the position taken by the presidential candidates -- Democratic and Republican -- who have been descending on New Orleans since the media stirred up the issue. Only populist liberal candidate John Edwards has focused exclusively on the symbolism of Katrina. The other Democratic candidates have roundly criticized the Bush administration's handling of the disaster, though, unlike Edwards, they have focused on offering pragmatic solutions to various troubles that still affect the city. These proposals include re-examination of government's role in society to various degrees, but they do not explicitly call for such a re-examination or a national referendum on the issue. If Katrina had fundamentally changed the Democratic Party, all Democratic candidates would be sounding like Edwards.

Katrina's Lasting Impact

Beyond softening the ground for a Democratic landslide, the disaster in New Orleans has not changed American politics. The final question is whether it will; in other words, whether Edwards is simply this year's lone progressive candidate -- the Howard Dean of 2008 -- or a harbinger of a new Democratic Party centered on issues relating to race, environment, labor and class.

We remain convinced that the major issues raised as a result of Katrina -- energy and climate, race and the role of government -- will emerge at the center of American politics in the coming years.

The impediment to the revival of a strong liberal wing of the Democratic Party is the popular view that liberal issues have no place in American politics -- or at least that liberal Democrats are overly idealistic and therefore cannot get things done in Washington. The concern over this is evident in that fact that even the Democratic presidential candidates are not emphasizing core progressive concepts during their anniversary speeches and tours in New Orleans. Rather, taking their cue from Bill Clinton -- the only Democratic candidate to be elected president in the past 28 years -- most candidates are attempting to exude confidence, competence and pragmatism -- not political idealism. Though their solutions to the country's problems imply a larger role for government, it is not central to their messages.

A new "progressive movement" is developing -- or at least that is what we call it since it has not yet been named and has no central leadership. This movement, however, clearly exists and it aims to reverse the negative view of liberal issues and leaders by framing its issues -- the same ones that mattered to the progressives of the past -- in pragmatic terms. In other words, by making the issues seem like mainstream concerns. To do this, the movement is relying on the proven technique of blurring the line between a fringe concept and a mainstream one. The climate change issue gained national prominence in this way. Environmentalists found a way to turn climate change into a foreign policy issue, vehicle fuel efficiency partly into a labor issue, and chemical regulation partly into a health issue and partly into a racial issue. Labor has used human rights and women's groups as spokespeople for its campaign against Wal-Mart. As these new ways of conceiving of traditional "progressive" issues become prevalent, traditional Democrats will find them easy to grasp -- and ultimately will support them.

As civil rights, civil liberties and social justice organizations learn to reframe their concerns in pragmatic terms, they too will gain momentum -- just as climate change has done. The only question is: How much longer will Katrina's impact last in the public mind? The 9/11 attacks lasted for almost four years as an active political tool. The Katrina issue is two years old, so if it has the same cultural permanence, 2008 is the last election in which it will matter.stratfor.com

Income Redistribution File: FEMA trailersThe Federal Emergency Management Agency (FEMA) announced this week that Hurricane Katrina refugees living in FEMA trailers would be permitted to move to hotels if they are concerned about formaldehyde gas in the trailers. A House committee found in July that FEMA had suppressed information about the presence of cancer-causing formaldehyde. In 2005, FEMA spent $2.7 billion on trailers that often couldn’t even be used because of regulations, as well as $1.8 billion on hotel rooms and cruise-ship cabins for those who were homeless after Katrina. Then there were those debit cards used to purchase such necessities as jewelry, furs and exotic dancing. While we will concede that losing one’s personal possessions to a hurricane can be emotionally devastating, we don’t recall seeing “lap dance” in any physician’s desk reference for reparative therapy.

Our question: Why has it taken more than two years for U.S. taxpayers to be relieved of this burden? The answer is simple: Your federal government at work.